Home REIT’s top tenant looking to offload leases as cash troubles continue
The biggest tenant of beleaguered property investor Home REIT is looking to offload its leases to other housing providers after warning it can no longer pay rent to the firm, City A.M. has learned.
Gurpal Judge, the chief of Lotus Sanctuary – which Home REIT says makes up 12.2 per cent of its rental income – told staff last week that the firm was struggling to secure so-called exempt housing status on many of its properties, a prerequisite for guaranteeing housing benefit payments, which was choking off its cash flow.
In an email seen by City A.M., Judge said: “As a result of [its failures to secure exempt housing status], Lotus’s financial position is worsening on a month-by-month basis and Lotus has now reached the stage where it is unable to continue to service payments due to landlords under the leases as and when they fall due.”
In the email, Judge claimed that Lotus “carries a significant debtor in its balance sheet” in respect of unpaid [housing benefits]” but there was “no visibility as to when such payments will be received from [local authorities], if at all.”
Lotus is now “very much open to the option of assigning the lease to another housing provider”, he said.
The fresh warnings come after City PM revealed last month that Lotus told staff it had built “substantial debt” of £2.7m and was suffering from cash flow issues due to failure to win exempt housing status.
Home REIT has repeatedly claimed that its rental income is backstopped by taxpayer-backed housing benefits from local authorities. However, Lotus’s failure to secure exempt status underscores the threats facing Home REIT’s rental income and raises major questions over the former FTSE250 firm’s repeated claims that its rent is ultimately backstopped by the taxpayer. Home REIT declined to comment.
In a statement to City PM Judge said Lotus was owed £2.7m from “multiple local authorities across the UK due to the time it is taking councils to review and accept exempt accommodation applications”.
“It puts a severe risk on Lotus and our residents,” he said.
“We are not in a huge amount of arrears and have been meeting all of our lease obligations until very recently.”
Home REIT has been rocked by rent troubles in the past few months as a host of its top tenants withhold rental payments from the firm.
City PM revealed in January that Big Help group and its sister charities, which cumulatively make up nearly a fifth of its rent, were withholding rent in protest at the state of the housing it provided. Another charity, Noble Tree Foundation, has also withheld rent from the firm in protest at a lack of promised refurbishments and rental support.
Some 35 per cent of Home REIT’s total rental income is now in jeopardy.